thinkorswim
Does IB take responsibility? An amazing story
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thinkorswim
also in these circumstances the brokers ace in the whole is that if the stock(s)..market moves quickly for what ever reason the brokers have the right to evaluate the stock options values thus also creating margin/liquidation situations..
many times I have written or bought options to have the stock move dollars in my favour but not my option..ie write April call ie 2dollars..stock falls two dollars and my price for my option becomes 2.70...when questioned broker states we have re-evaluated the stock and have decide the new price for the option is 2.70...over or under valued before..
the volitility works always in the brokers favour
w
Because of my respect for you, let's say I take for granted there are some cases what you are saying is true. But IMHO, this case was totally different.
It's literally IMPOSSIBLE that if/ when a broker is entitled to liquidate a position because of risk management, that he can bring his 3-year-old to the computer to make the decisions what to liquidate, when positions can be complex and requires at least a couple of operating brain cells to work. Many legs that were liquidated here not only did unnecessary harm because it gave NO benefit to the broker, but several legs literally INCREASED the so-called "risk" to the broker (if you call the 50:1 ratio risk)!
To the best of my understanding, the computer goes in liquidation rounds, and even failed to acknowledge what's flying AFTER the liquidations occurred, to the extent that in one "euphoria" of 11 seconds, wiped out a total of 516 options out of the box spreads!
If such a thing was allowed, why should a broker ever spend even 4 figures to hire someone in risk management, when he has little children available? I literally don't see how the IB auto-liquidate did anything different!
I do understand everything you are saying. But i think brokers get a lot of leeway to protect themselves since they are responsible if left holding the bag.
Your position is definitely not on par with a seller of naked straddles or naked puts in a severe market swing and I think those people attacking you should take that into account. The risk of your position was limited to whatever ask was available to close the BOX and in BOX situations a different approach would seem warranted. Your risk could have been greater than the strike spread but absent early assignment, your risk was easily defined and not something that would have escalated out of control bankrupting the company as a naked position could have. Afterall your BOX would still be in place if they did nothing unless early exercise notice was granted. Therefore, it would have been quite easy in a BOX situation for IB to take a different approach and simply place a margin call to the account. Or in other words, you were not in any hole at the time and perhaps just needed to pare down the BOXES or add mroe cash. If you did nothing for 2 days the BOX would still be there (assuming this was some time ago and expiration date was no right after) and you could have closed a few BOXES or IB could have requested immediate deposit of funds.
I wonder if IB would state whether a BOX spread should involve a different approach. Since if you are holding a BOX, assume a European one, and the market crashes or surges, the position does not have unlimited risk, such as naked options.
Just my thoughts and opinion....
Your position is definitely not on par with a seller of naked straddles or naked puts in a severe market swing and I think those people attacking you should take that into account. The risk of your position was limited to whatever ask was available to close the BOX and in BOX situations a different approach would seem warranted. Your risk could have been greater than the strike spread but absent early assignment, your risk was easily defined and not something that would have escalated out of control bankrupting the company as a naked position could have. Afterall your BOX would still be in place if they did nothing unless early exercise notice was granted. Therefore, it would have been quite easy in a BOX situation for IB to take a different approach and simply place a margin call to the account. Or in other words, you were not in any hole at the time and perhaps just needed to pare down the BOXES or add mroe cash. If you did nothing for 2 days the BOX would still be there (assuming this was some time ago and expiration date was no right after) and you could have closed a few BOXES or IB could have requested immediate deposit of funds.
I wonder if IB would state whether a BOX spread should involve a different approach. Since if you are holding a BOX, assume a European one, and the market crashes or surges, the position does not have unlimited risk, such as naked options.
Just my thoughts and opinion....
We are doing hundreds if not thousands of auto-liquidations per day. If the algorithm is horrible, then angry customers tore us to small pieces long time ago. The algorithm is smart enough to not harm the account unnecessarily. The best proof is that Option Trader was not supported by a bunch of customers with similar problems.
Errors in the automatic liquidation algorithm are possible. We are fixing these problems ASAP. I know several cases when bugs caused bad liquidations and customers received a full compensation or we rebuilt their account, which was expensive sometimes. That happens VERY rarely. Generally, it is your responsibility to not allow any liquidation to start.
Errors in the automatic liquidation algorithm are possible. We are fixing these problems ASAP. I know several cases when bugs caused bad liquidations and customers received a full compensation or we rebuilt their account, which was expensive sometimes. That happens VERY rarely. Generally, it is your responsibility to not allow any liquidation to start.
Thank you.
Yet, in order that the not-so-common occurrences should NOT scare anyone away, IMHO, illustrating to everyone that when it DOES happen it would be sorted peacefully and easily is all we ask.
The idea that the absence of a large number of complaints proves the absence of a problem is unreasonable and dangerous. Everything else ids said, I think, was reasonable and reassuring. It reassured me, not just with regard to IB's auto-liquidation software, but more importantly, with regard to IB's overall honor and integrity. I was glad to see ids say those things. Ids has shown, in response to the question posed by the title of this thread, that yes, indeed, IB does take responsibility, where it should do so, but customers also need to take responsibility for their own part.
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